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HowhasoutsourcingaffectedpublicservicedeliveryinHongKong?
Illustratewithrelevantcases.
ByBrendaChan,DavidWong,Hooly Leung,OlgaChanandBorisSiu
Outsourcing throughtheeyesof
Tosee
CostQualityofserviceSocialImpact
Government Contractor CivilSociety
OutsourcinginHongKong OutsourcinginHKGovernment:wheneverpossible Outsourcingnoncoreservicesandroutineexecutionprocesses
Corefunctionsanddefinitiondecisionsremaininhouse:policyformulation,publicfundsbudgeting,regulatoryandcontrolmeasures,licencing andlawenforcement
Examples:publicworks,environmentalhygiene,leisureandculture,transportation,security,propertymanagement,informationandtechnologies
GovernmentOfficialsGovernmentOfficialsViewonCostViewonCost
CostEffectiveness
Lowerservicecost
Downsizingofcivilservants
Transferalofoperationalrisks
Flexibilitytomeetfluctuatingneeds
Lowerservicecost
Publicservicedeliveredbygovernment:inefficientandineffective
Civilservants:employedintenure;lackincentivetoimproveservice
Lowerservicecost(2)
Marketcompetition:sameservicelowercost Businesscycletriggeredimprovingqualityofservice:bids,tendering,contractualperformance,assessmentofbidderspastperformanceinfuturebidsandtendering(e.g.FEHDs defaultnotice)
Increasingdemandsofpublicservicemetbylimitedresources
Lowerservicecost(3) EfficiencyUnit2010SurveyonGovernmentOutsourcing:80%contractsgotolowestpricebids
Lowerservicecost(4) EfficiencyUnit2010SurveyonGovernmentOutsourcing:overallcostsaving26%35%
Downsizingofcivilservants
Containortrimdowntheno.ofcivilservants Saveresourcesonstaffwelfare(e.g.medicalserviceandMPFcontributions)
Staffmanagementisoutsourcedthroughoutsourcingofpublicservicedelivery
Fewersupervisorygradeofcivilservants Stafftrainingtodeliverpublicserviceperformedbycontractors
TransferalofOperationalRisk
Businessmarketismorereadytocopewithchangingenvironment(e.g.fasttoemploymoreparttime/contractstafftohandleincreasingworkload)
Contractorshaveexpertiseandextensiveexperienceintheirownbusinessfield
Flexibilitytomeetfluctuatingneeds
Avoidunderutilizationofstaffandotherresources
Notallpublicservicerequiredfixedsetofstaff(e.g.cateringserviceandenvironmentalhygiene)
Projectbasedpublicservice
GovernmentOfficialsGovernmentOfficialsviewonQualityviewonQuality
Governmentsexpectations
To improveexistingservices
Tomeetincreasingdemandsandnewservicerequirements
Togainaccesstonewskills
andtechnology
Satisfaction Survey
Effective monitoringsystem ServiceLevelAgreement KeyPerformanceIndicators
MarkingSchemeandTwoenvelopesystem(technicalandcost)intenderingexercise
SatisfactionSurvey
Fulfilledthekeyobjectives
SatisfactionSurvey
Technicalweighing Betterqualitysolution
SatisfactionSurvey
B/Dsinvolvebestpracticesinoutsourcingactivities
QualityAssuranceestablishedmechanism
Beforeoutsourcing Thedecisionmakingframework Termsandconditions,tenderingprocedures
TenderEvaluation ContractMonitoringandReview FeedbackfromContractors 3rdpartymonitoring
PerformancemonitoringmechanismadoptedbyB/Ds
ChallengeAhead
Lackofexperience/experts? Diminishedgovernmentcapacity? Downsizingthegovernance?
Accountabilityonservicequality?
FutureDevelopment
Contractmanagement
Concentrationoncorefunction
OutsourcingITserviceinHousingAuthority
Three main types of IT outsourced project :
1. Application Maintenance
2. Operational Support3. System Integration
Project
OutsourcingCleaningService inFEHD
Ahighqualityservicespecificationhasthreekeycharacteristics:
Primarilybeingoutputbasedandnonprescriptive;Focusingonkeyissuesandobjectivestobeaddressedintheoutsourcinginitiative;
GovernmentOfficialsGovernmentOfficials ViewsViewsontheSocialandEconomicalontheSocialandEconomicalInfluencesofOutsourcingInfluencesofOutsourcing
Social,EconomicalandPoliticalInfluencesofOutsourcing
TheGovernmentoutsourcingexpenditurevariedfrom$44.1billionto52.0billionfrom2006to2010.
OutsourcingisaveryimportantmodeoftheGovernmentspending.
HongKongsocial,economicalandpoliticalactivitiesareunderhugeinfluencebytheGovernmentsoutsourcingactivities.
Social,EconomicalandPoliticalInfluencesofOutsourcing
ExecutionoffiscalpolicybytheGovernment
Pursuingpolicygoalsasamarketforce
Promotinglawabidingbehaviorinthebusinesssectorasamarketforce
OutsourcingExecutionofFiscalPolicy
TheBasicLawArticle107impliesthatevenintheadverseeconomicsituation,theGovernmentislegallyobligednottorunalongtermbudgetdeficit.
TheGovernmentisusuallynotwillingtoincreaseitsrecurrentspending,soithastoturntooneoffexpenditureitems.Outsourcingseemstobethebestoption.
Duringtheadverseeconomicsituation,theGovernmentcaninitiatenewprojectsorspeeduptheongoingone.Thisactionmightleadtobudgetdeficit.
OutsourcingExecutionofFiscalPolicy
Morepeoplecanbeemployedintheseprojects,alleviatingtheunemploymentproblem.
Increasingoutsourcingscalecanimprovetheeconomicsituationofthesociety.
Whenthelocaleconomygetsimproved,theGovernmentcanreprioritise theongoingprojectsorevenstoptorunadeficitbudget,meetingthebalancedbudgetrequirementintheBasicLaw.
OutsourcingExecutionofFiscalPolicy
PossibleProblems
Buildingwhiteelephantswithlittlesocialoreconomicvalues.
WorkersofoutsourcedpublicserviceswouldbefirediftheGovernmentterminatedtheoutsourcedservices.
OutsourcingPursuingPolicyGoals
2011/12PolicyAddress,Para.159:
TheGovernmentwillencouragethelocalindustrytodevelopadvancedcloudcomputingtechnologiesandapplications. Inthenextfewyears,wewilldevelopagovernmentcloudplatformandprocurepubliccloudservices.
OGCIOWebsite:
TheprimaryobjectivesoftheGovernmentIToutsourcingpolicyaretoenlargethedeliverycapacityforITservices,toacceleratethe deliveryofITsolutions,andtocreateamarketofsufficientsizetoencouragethefurtherdevelopmentoftheITindustrylocally.
OutsourcingPursuingPolicyGoals
OGCIOhastwomainestablishedoutsourcingarrangementsforBureaux andDepartmentstoprocureICTservices:
StandingOfferAgreementforQualityProfessionalServices2(SOAQPS2)
T22Contracts
OutsourcingforICTservicesisconsideredasoneoftheGovernmenttacticstoencouragethegrowthoftheHongKongICTsector.
OutsourcingPursuingPolicyGoals
Asannouncedandwitheffectfrom1September2009inCEDDs NoticeforGrabmountedDumpTruck,allthegrabmountedtrucksworkingforpublicworkscontractspublicworkscontractsshouldbeinstalledwithsuitablecoverwhichcanbeoperatedsafelyandpreventthereleaseofdustduringtransportationofconstructionwastes.
OutsourcingPursuingPolicyGoals
Theaimsofthispolicy:
Tominimise thedustduringthetransportationofconstructionwaste.
Topreventthetruckfromoverloading.
Toprovideasaferworkingenvironmenttothedumptruckdrivers.
Thedumptruckdriversarediscouragedtoarguewiththeirclient(theGovernment)todetertheimplementationofthescheme.
Thisenvironmentalandpublicsafetyfriendlymeasurecanbeimplementedwithminimumopposition.
OutsourcingPromotionofLawAbidingBehavior
FromContractorManagementHandbook RevisionB issuedbyDevB,poorsitesafetyrecords,poorenvironmentalperformance,courtconvictions(e.g.contraventionofsitesafetylegislation,EmploymentOrdinanceandemploymentofillegalworkers),violationoflawsrelatedtopublicsafetyandpublichealthmayleadtothetakingofregulatingactionsbytheGovernmentagainsttheContractors.
AntiPollutionLegislation
OccupationalSafetyandHealthOrdinance(Cap.509)
Section17Ior38AofImmigrationOrdinance(Cap.115)
EmploymentOrdinance
OutsourcingPromotionofLawAbidingBehavior
Possibleregulatingactions:
SuspensionforbiddingGovernmentscontracts.
Downgradingthevendortoprobationarystatus.
DemotionthecompanytoalowergroupofApprovedSupplierListwhichcanonlybidforlowervaluecontracts.
Thebusinesssectorisdiscouragedtopollutetheenvironment,ignorethehealthandsafetyoftheiremployees,employillegalworkersortreattheirworkersunfairly.
ContractorsContractors ViewsViews
Contractors ViewforOutsourcing
As at 1 July 2010, there were 5 111 government outsourcing service contracts each costing over $150,000, comprising 1 136 works contracts (22%) and 3 975 non-works contracts (78%).
Extract from Report on 2010 Survey on Government Outsourcing (May 2010)
Contractors ViewforOutsourcing The number of outsourcing contracts increase has continued to rise
from 3 984 in 2006 to 4 339 in 2008 and further to 5 111 in 2010 Welcome Outsourcing as Business Opportunity
Extract from Report on 2010 Survey on Government Outsourcing (May 2010
OutsourcingTopThreeAttractionsofGovernmentContract
Securepayments(90%,3%);
Buildupcompanyimage(65%,3%)
Open,transparentandfairprocurementprocess(50%)
NGOs&InterestGroupsOpportunityforInvolvementinPublicManagement
Extract from Report on 2010 Survey on Government Outsourcing (May 2010
OutsourcingImpactoncostofPublicServicesDelivery
Bestmethodtosavethecost&
lowertheoverallexpenditure
No Bureaucraticprocurementprocedure
Purchasegoodsmorequickly
Negotiatebetterprices Maintain lowerinventories
Flexible position tohire, dismiss andpromoteemployees
Profitoriented
OutsourcingImpactoncostofPublicServicesDelivery
LowestBidder Practice
Extract from Report on 2010 Survey on Government Outsourcing (May 2010
OutsourcingImpactoncostofPublicServicesDelivery
Cutcost Exploitationofworkers,Bidrigging(Collusion).
SavingFinancialCostofContractor PassingPoliticalCosttoGovernment
Case ContractCAinBD&EMSD 8
1,2001,50088,000
OutsourcingImpactsonPublicServiceQuality
In2007,theAuditCommissionhadconductedareviewofgovernemnt outsourcing,whichcoversthreedepartmentshavehadsubstantialoutsourcingactivities,theyareFEHD,LCSDandHD
Attainmentofcostsavingsthroughoutsourcingservies. Littleinformationonperformanceinformationontheservice
qualityimprovments achievedthroughoutsourcing. Inadequatemonitoringoftheperformanceofoutsourcing
contractorsbythedepartments
OutsourcingImpactsonPublicServiceQuality
Nocontractterminationduetounsatisfactoryperformanceofthecontractorduringtheperiodof1July2009to30June2010
Finalresponsibilityofprovidinggoodoutsourcedpublicservicesremainswiththedepartment,whichdrawsuptheoutsourcingcontractandexerciseeffectivemonitoringrole
OutsourcingSocial&EconomicImpacts
EconomicDevelopment Developmentofaknowledgebasedeconomy
Oligopolyofparticularservice
BidRigging&Collusion IncreaseinvolvementofSocialEnterprise&InterestGroups
CivilSocietyCivilSocietysViewssViews
CivilSocietyexpectation Cost&Quality Similarorevenbetterservicequalityfromprivatesector
Lowertaxwithmorepublicservices
CustomeropinionsurveyLSCDsportsfacilities
Target:Usersoffacilities ComparetheserviceoftheSportsCentreandSwimmingpool(Outsourcedvs Selfmanaged)
ThescoreforoutsourcedandLCSDmanagedcentreare7.5and7.65pointsrespectively(010pointsscale)
CustomeropinionsurveyLSCDsportsfacilities
CustomeropinionsurveyBuildingmanagement
LeiChengUk EstateandTaiHangTung Estate
ManyresidentsagreedthattheservicesofprivatecompanyisbetterthanHousingDepartment(around40 50%)(e.g.Patrolfrequency,Visitorregistration,servicehour,accessibilityetc)
Theotherservicesqualityareroughlythesame(e.g.Cleanliness,buildingrepairworks,buildingmaintenanceetc)
CustomeropinionsurveyBuildingmanagement
Negativeview Cost&Quality
Smallprofitmarginofthecontractmayleadtopoorservice
Poorequipmentandlackingcontingencyplan
AffectGovernmentimage Civilservantneedtoshoulderresponsibilityforpoorqualityofoutsourcedservices
Negativeview Cost&Quality
SocialimpactLabour exploitation
Underpay Nosalaryincrease Nocareerprospect
Socialimpact
Labour exploitation
Nojobsecurity Lowstaffmorale Insufficientpenaltytocontractor
Statutoryminimumwage
Conclusion
Cost ServiceQuality
Socialimpact
Government
Contractor
CivilSociety